Arbitration Waivers in Light of Quach v. Cal. Commerce Club, Inc.

Quach v. Cal. Commerce Club, Inc., 78 Cal.App.5th 470 (2022), presents an important legal question regarding arbitration waivers in California, especially in the context of recent developments in federal arbitration law. This case reviews whether California’s standards for determining a waiver of the right to compel arbitration remain viable following the United States Supreme Court decision in Morgan v. Sundance, Inc., 596 U.S. 411 (2022).

Case Background

The case emerged from a situation where an employer, as part of its employment policy, required all employees, including the plaintiff, to sign an arbitration agreement. Following the plaintiff’s termination, he filed a lawsuit for wrongful termination and other claims. During the litigation, the employer was actively involved in defending against the lawsuit for eleven months before moving to compel arbitration upon locating the complete arbitration agreement.

California Court of Appeal’s Decision

The Court of Appeal reversed the trial court’s finding of a waiver of arbitration rights by the employer. The decision underscored that while no single factor is definitive, the absence of prejudice to the plaintiff was a critical aspect of the appellate court’s analysis in determining whether a waiver occurred.

Morgan v. Sundance, Inc. Influence

The U.S. Supreme Court’s decision in Morgan v. Sundance, Inc. has significant implications for this case. The Morgan ruling discarded the requirement of establishing prejudice to determine a waiver under the Federal Arbitration Act, focusing instead on the employer’s conduct. This shift brings into question the traditional approach to arbitration waivers and sets a new standard that primarily examines whether an employer acted inconsistently with the right to arbitrate.

Pending California Supreme Court Decision

The California Supreme Court’s upcoming decision in Quach is expected to clarify the state’s position on arbitration waivers, particularly in light of the Morgan decision. The court will likely address whether litigation activities can be considered so inconsistent with the intent to arbitrate that they constitute a waiver, independent of the prejudice to the opposing party.

Conclusion

Quach v. Cal. Commerce Club, Inc. stands at the intersection of state and federal arbitration law, offering a compelling look into how arbitration agreements are interpreted and enforced. The outcome of this case will be closely watched for its potential impact on arbitration waivers in California, particularly in employment law.